Introduction to Economics

We already know that changes of price produce responds in supply and demand. The law of demand describe an  inverse relationship  while the law of supply describes a  direct relationship  between the quantity and the price. But this relationships are not always proportional. Different markets will respond differently to changes. Elasticity helps us describe this degree of responsiveness. The most important is the  price elasticity . Price elasticity of demand Price elasticity of demand (PED) shows the relationship between price and quantity demanded and provides a precise calculation of the effect of a change in price on quantity demanded.  The formula for calculating price elasticity of demand is : Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price The range of responses The degree of response of quantity demanded to a change in price can vary considerably.  If quantity demanded changes proportionate...

It should be clear by now that economics covers the allocation of scarce resources. But the field of economics if often broken down into two categories: microeconomics and macroeconomics . Microeconomics Microeconomics is the branch of economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interaction among these individuals and firms. One goal of microeconomics is to study the supply and demand and other forces that determine the price in a particular market. For example, what combination of goods and services would fit a specific household's needs and wants or how a specific company could maximize its productions and capacity and both microeconomics related questions. Macroeconomics Macroeconomics is the branch of economics that studies the behaviour and performance of an economy/industry as a whole and not just of specific companies. Macroeconomists  study aggregated indicators suc...